According to the survey, investors in India (82 percent) think the domestic stock market will rise in 2014, with nearly half believing it will surge significantly. Indian investors remain optimistic about the coming year, even though the prior year’s performance did not meet their expectations. Investors think that best equity opportunities in 2014 and over the next 10 years will be in India, with broader Asian markets in the second place. The percentage of the Indian respondents who believe that best equity returns will be from the local market over the next 10 years have stayed consistent with the findings from our 2013 survey. In fixed income, investors think that India will offer the best-fixed income returns in 2014 and over the next 10 years. The survey also shows that the Indian Investor believes property, stocks and precious metals will be the top three performing asset classes in 2014 and over the next 10 years. Unlike 2013, Indian investors are more positive about the performance of property and have less expectation about the performance of precious metals in the coming year and over the next 10 years.
Five years after the onset of the 2008-2009 market downturn, investors continue to show signs of risk aversion, despite an optimistic outlook for the future. Globally, 52 percent of investors are planning to become more conservative with their strategies this year, taking on less risk with the potential of earning lower returns. However, this risk aversion is less pronounced than last year when the annual survey showed that 57 percent of investors planned to be more conservative with their investments. In India, 59 percent of the investors plan to be more conservative according to this year’s survey compared to 62 percent last year.
This trend towards conservatism runs counter to the fact that most investors expect better stock market performance and higher returns from their investments this year, as well as the fact that four out of five investors feel optimistic about reaching their financial goals.
“In the long term, the greatest risk investors run is remaining too risk-averse for long. Building portfolios based on short-term phenomena, not long-term realities, could put them in danger of falling well-short of their goals. A smart approach to managing investment risk is not to categorically avoid risks but to ensure that risks taken are intended, understood and appropriately compensated with an eye on achieving longer-term investment goals.” said Harshendu Bindal, President, Franklin Templeton Investments - India.
Investor Perceptions vs. Market Realities
The survey has shown that investor perception often diverges from reality; a fact that may impact investors’ ability to make well-informed investment decisions. Interestingly just over half (55 percent) of investors believed their local stock market was up last year, when in reality, 77 percent of the 22 equity markets performance positively (17 of the 22 markets)
A large number of investors in India (82 percent) think the Indian stock market will rise in 2014, with nearly half believing it will surge significantly. Investors in India remain optimistic about the coming year, even though the prior year’s performance did not meet their expectations.Inspite of this optimism, 59 percent of Indian investors plan to be conservative in their investment approach in 2014 compared to 52 percent in 2013.
Globally, investors’ outlook for their local stock market this year was more optimistic, with 62 percent believing the market will experience positive performance. Notably, following a down year, Indian investors showed a markedly higher level of optimism than other investors, with over 80 percent expecting 2014 to be a bright year for local stocks.
Investors in India think the best equity opportunities in 2014 and over the next 10 years will be in India, with broader Asian markets in the second place. The percentage of the Indian respondents who believe that the best equity returns will be from the local market over the next 10 yearshave stayed consistent with 2013 expectations. In terms of fixed income, investors think India offers the best fixed income returns in 2014 and over the next 10 years, with broader Asian markets in the second place followed by the U.S. and Canada markets.
Asset Class Expectations
Consistent with 2013 survey findings, stocks, real estate and precious metals topped the list of asset classes that investors expect to perform best in the year ahead. Over half (55 percent) of investors globally believe stocks will be among the top-performing asset classes this year, up from 50 percent in 2013. Precious metals fell out of favor with some investors this year, dropping from 53 to 39 percent, while investors’ outlook for real estate stayed fairly consistent year-over-year.
Meanwhile the survey also shows that the Indian Investor believes property, stocks and precious metals to be the top three performing asset classes in 2014 and over the next 10 years. Unlike 2013, Indian investors are more positive about the performance of property and less positive about the performance of precious metals in the coming year and over the next 10 years.
|Perceived Top-Performers 2013||Perceived Top-Performers 2014|
|Real Estate – 65 percent||Real Estate – 60 percent|
|Precious Metals – 63 percent||Stocks– 49 percent|
|Stocks – 47 percent||Precious Metals –48 percent|
Of the countries surveyed, investors in Japan and Hong Kong showed the greatest preference for stocks, with over 77 percent ranking stocks among the top three asset classes for expected 2014 performance. Greek investors had the most optimistic outlook for precious metals, while Australian and Malaysian investors showed the strongest preference for real estate investments this year.
Where is the Money Heading? – Asset Class Preferences for 2014
On a whole, global investors indicate they are most likely to add real estate, home country and emerging market equities, as well as precious metals to their portfolios in 2014. Thirty percent of global investors plan to add or increase their exposure to domestic equities while nearly one-quarter (23 percent) plan to increase their investment in emerging market equities and precious metals.
The survey also highlighted that Indian investors are looking to add or increase investments in equities, real estate as well as precious metals to their portfolio.
Investors See Most Risk and Reward Potential in Stocks
While investors see the most potential in stocks this year, they also recognize the risks involved with investing in the asset class. Globally, stocks, the U.S.Dollar and alternatives topped investors’ lists of the asset classes they believe will carry the most risk this year. Along with performance perceptions, investors think stocks will be among the riskier investments in the coming year, followed by the U.S. Dollar and precious metals.
\“Renewed enthusiasm for stocks is encouraging, as many investors will need the higher potential returns stocks have historically provided over the long term in order to reach their financial goals. It is also clear that investors recognize higher returns are likely accompanied by higher risk,”added Harshendu Bindal President, Franklin Templeton Investments - India.
Investors Look Beyond their Borders for Opportunity
Globally, two-thirds of investors believe the best equity and fixed income opportunities will be found outside their home countries this year, echoing findings from Franklin Templeton’s 2013 survey.
Investors in South Africa and Italy showed the greatest interest in investing abroad, with 85 percent believing the best opportunities exist beyond their borders. At the other end of the spectrum, investors in the U.S. were the least keen on investing abroad this year, with over 60 percent believing the best investment opportunities will be found within the States. The U.S. market was up over 30 percent last year and U.S. investors were among the most likely to believe interest rates will rise this year, factors which may be contributing to their home country bias for equity and fixed income investments.
Top Concerns - Fiscal Policy in the US and Europe
When asked to rank their top concerns about investing in Europe and the US, global investors showed the greatest concern about government fiscal issues and their drag on the economy.
When considering European investment opportunities, 62 percent of global investors ranked “euro zone debt crisis” as their top concern. “Slow economic outlook” (46 percent) and “general market volatility” (35 percent) rounded out the top three concerns. European investors (66 percent) were the most likely of all regions to find the euro zone debt crisis as a top concern about investing in the region.
When considering the US, 60 percent of global investors ranked “large fiscal debt” as their top concern, followed by “slow economic outlook” (40 percent) and “tapering of the Federal Reserve’s bond buying program” (39 percent). At 66 percent, investors in the U.S. and Canada were the most likely to be concerned about the large fiscal debt. Investors in Asia were significantly more concerned about the Fed taper than the other regions surveyed, with 45 percent ranking this among their top concerns about investing in the States. Also, 50 percent of Latin American investors listed “large fiscal debt” as the top concern about investing in the US.
Benefits of Consulting a Financial Advisor
The survey results show that, globally, investors who work with a financial advisor have more diversified portfolios and are more likely to invest outside their home countries than those who don’t work with an advisor. They’re also more likely to be optimistic about reaching their financial goals and have higher expectations for their investment returns. “Navigating global markets can be a complex endeavor. These survey results show investors can benefit from working with a financial advisor to make fully informed investment decisions to appropriately position their portfolios,” said Greg Johnson, chairman, CEO and president of Franklin Templeton Investments.
Survey findings from this year also indicate that investment professionals are the biggest influencers for investors when it comes to investing in mutual funds followed by print and electronic media in India. Also, Indian men are more influenced by investment professionals than women in the country.
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